2012 · 2015. 6. 26. · the alderney gambling control commission (‘the commission’) is...

ALDERNEYGAMBLING CONTROL COMMISSION

2012 ANNUAL REPORT & ACCOUNTS

Office address: St. Anne’s House Queen Elizabeth II Street Alderney Channel Islands GY9 3TB

Telephone number: +44 (0) 1481 825500

Facsimile number: +44 (0) 1481 823978

General enquiries: Rowie Gaydon (Office Administrator)

[email protected]

Website address: www.gamblingcontrol.org

Alderney Gambling Control Commission 2012 Annual Report & Accounts 11

ALDERNEYGAMBLING CONTROL COMMISSION

31 May 2013

The Chairman

Policy and Finance Committee

States of Alderney

PO Box 1

Alderney

GY9 3AA

Dear Sir,

I have pleasure in presenting the Report of the Alderney Gambling Control Commission

for the period 1 January to 31 December 2012.

Yours sincerely

John Godfrey

Chairman

Members: John Godfrey (Chairman), Isabel Picornell, Jeremy Thompson, Lord Faulkner of Worcester.

Mission statement & objectives 2

Chairman’s statement 3

The Commission 4

Approach to regulation 9

Anti-money laundering / combating 12 the financing of terrorism

Licensing and Compliance activity 14

Technical activity 20

Financial statements 21

Appendix A - Holders of licences and associate certificates 29

Appendix B - Statistics 30

Contents


2 Alderney Gambling Control Commission 2012 Annual Report & Accounts

Mission Statement

Objectives

The primary objective is to protect and enhance the reputation of Alderney as a first tier regulatory jurisdiction by

seeking to ensure that:

• Allelectronicgamblingisconductedhonestlyandfairlyandincompliancewithgoodgovernance;

• Thefunding,managementandoperationofelectronicgamblingremainsfreefromcriminalinfluence;and

• Electronicgamblingisregulatedandmonitoredsoastoprotecttheinterestsoftheyoungandthevulnerable

and without compromising this primary objective, to work with other agencies in the development of eGambling

activities regulated by the Commission.

To ensure and maintain the integrity of the electronic gambling activities regulated by the Commission.

The main changes to our regulations during 2012

improved the protection of player funds. Other issues

are referred to elsewhere in this report.

We continue to emphasise the value of establishing

relationships with other jurisdictions. Specifically,

we continue to develop a network of memoranda

of understanding with suitable partners. These

memoranda set out the protocols for co-operation,

particularly as regards shared licence holders.

But the most important issues for us have been

outside our jurisdiction and largely outside our control.

Companies licensed in Alderney must find the majority

of their customers outside the Channel Islands and are

therefore subject to the laws of the countries in which

they do business in addition to our requirements.

Because of this, we have taken a particular interest

in developments within continental Europe and in the

United Kingdom, particularly as regards what is called

Point of Consumption regulation.

Point of Consumption regulation requires operators

to hold a licence in the jurisdiction in which they serve

customers in addition to regulation in the jurisdiction

where they conduct their business. It is an effective

method of raising tax revenues but it brings risks for

players. Tax rates that are too high drive customers

to unregulated operators who can offer better odds

and some of the countries of consumption may not

observe high regulatory standards.

Our policy has been to seek to persuade governments

that, while we recognise that certain aspects of control

are most appropriately exercised within individual

jurisdictions, minimum operating standards should be

universally recognised and unnecessary duplication

should be avoided. Informed opinion both supports

this approach and recognises the quality of regulation

in Alderney.

For example, other regulators do not generally share

our practice of continually monitoring licensees’

gaming software changes or of routine annual

inspection of licensees.

We will continue to argue that our licensees should

not be subject to additional costs and bureaucratic

interference that do not add anything of value to the

regulatory supervision of their operation.

Finally, I wish to use this report to pay tribute to Ray

Birdseye who retired from the Commission in 2012

having served as a Commissioner since its inception

in 2000. In addition to his personal qualities, which will

be greatly missed, he brought the skill and experience

of a former banker and regulator to our proceedings.

We are fortunate to have Lord Faulkner of Worcester

as his replacement. Lord Faulkner has considerable

knowledge of the gambling industry including

membership of the scrutiny committee of the draft

Gambling Bill in 2005 and as chairman of the all-party

enquiry into sports betting at that time. He has also

acted as strategy adviser to major companies in the

industry and to this Commission.

I also wish to thank our resourceful and hardworking

staff for their continuing loyalty and enthusiasm

and the States of Alderney for their confidence and

support.

John Godfrey

Chairman

Chairman’s statement


The Alderney Gambling Control Commission (‘the Commission’) is independent and non-political. It includes people with experience of gaming, regulation and licensing. The Commissioners are:

The Commission


John Godfrey Chairman of the Commission (seated right)John Godfrey is a specialist in gambling regulation. He was re-appointed as Chairman of the Commission for a third term of office in 2009. He was consulting accountant to the Gaming Board for Great Britain for almost 30 years and an adviser to the Government of The Bahamas. For much of this time, John was also an expert witness for the Metropolitan Police. John chaired the eGambling Working Group of the International Association of Gaming Regulators from its inception until 2007. He is a director of a manufacturing company based in the UK and is a Governor of The Place centre for contemporary dance. He is also a Trustee of The London Youth Support Trust and of a charity that promotes chamber music.

Raymond Birdseye Commissioner (standing right)Raymond Birdseye held the position of President of Barclays Bank Corporate Division in North America for a number of years before joining the Board of the Civil Aviation Authority (CAA) as financial regulator for United Kingdom Airline Companies and Air Travel Organisers Licences. Additionally, he was Chairman of the CAA Audit Committee and several other committees. He was re-appointed as a Commissioner for a third term in 2009 and retired from the Commission at the end of 2012.

Isabel Picornell Commissioner (seated left)Isabel Picornell lives on Alderney, and is a certified fraud examiner specialising in language evidence. She holds a PhD in forensic linguistics and provides consultancy services to the legal and corporate intelligence industry. Isabel is a Dame of the Order of Isabel la Catolica, knighted for services rendered to Spain. She has a particular interest in compliance and anti-money laundering.

Jeremy Thompson Commissioner (standing left)Jeremy Thompson is a business consultant who joined the Commission in 2010. He lives on Guernsey where he provides consulting services and holds several non-exec-utive director roles for Channel Islands based funds. He has a background of senior management roles within the telecoms, engineering and oil sectors and was one of the first private sector members to attend the Royal College of Defence Studies.

The Commission had a staff complement of 19 people on 31st December, 2012. The Executive consists of André

Wilsenach, Michael Ellen and Jorn Starck.


The Commission (continued)

André Wilsenach Executive Director (centre)André Wilsenach has a long history in gambling regulation. He served on both the national and provincial gambling boards in South Africa. Subsequently, he became the first CEO of a South African company which was established to render electronic monitoring services to the National Gambling Board of South Africa. He was chair of the International Association of Gaming Regulators for 2009 and a member of the International Masters of Gaming Law. André is the Commission’s Executive Director.

Michael Ellen Director, Licensing and Strategy (right)Michael Ellen is a qualified chartered accountant with extensive experience in the financial services industry both in the UK and internationally. Michael joined the Commission in 2005 as a senior inspector, was promoted to Chief Inspector in 2006 and became the Director, Licensing and Strategy in March 2011.

Jorn Starck Director, Compliance (left)Jorn Starck, has a long standing senior management background in the gambling industry, specifically in the areas of sports betting and customer services. Jorn joined the Commission in December 2007 becoming Director, Compliance in March 2011.



THE WORK OF THE COMMISSIONThe operational responsibilities of the Commission are divided into two broad areas of activity: licensing (which includes investigations) and compliance activities.

LICENSING – this involves the investigation of any new applicants to determine that they are fit and proper to be issued with a licence or certificate, as well as the maintenance of all required records regarding licensees and certificate holders. As part of an initial investigation, all aspects of an organisation and their key personnel are subject to rigorous and thorough probity reviews.

COMPLIANCE – this includes the approval of licensees’ gambling equipment and internal controls and operating procedures, the ongoing review of routine financial and operational reports, the monitoring of operational and game changes and a comprehensive programme of annual inspections of licensees’ operations.

Back row left to right (1-13)(1) Antony Rebanks, (2) Paresh Rughani, (3) Mark Archbold, (4) Neil Howard, (5) George Sauvage (Facilitator), (6) Michael Ellen, (7) Bruce Florance, (8) Jorn Starck, (9) André Wilsenach, (10) Philip Taylor, (11) Darin Oliver, (12) Konstantinos Despotakis (13) Ian Haywood

Front row left to right (14-20)(14) Nicky Burland, (15) Paula Moore, (16) Rowie Gaydon, (17) Lisa Sanders, (18) Kelly Spencer, (19) Ceri Macfarlane, (20) Christie Crawford

1 23 4 5 6

7 8 9 10 11 12 13

14 1516 17 18 19

20

The Commission staff workshop, December 2012, with facilitator George Sauvage.



The licensing directorate is split into two sections, investigations and licensing.

Investigations, which is staffed by Michael Ellen and Darin Oliver, supported by members of the compliance team when appropriate, as well as external experts in due diligence, undertakes the work necessary to enable the Commissioners to determine whether an applicant is fit and proper.

Licensing, which is headed by Michael Ellen and staffed by Kelly Spencer, Christie Crawford and Ceri Macfarlane, handles the administration of all incoming applications as well as a range of administrative functions. The team attends in large part to the personal suitability appraisals undertaken by the Commission and maintains the Commission’s records of licensees, associates and approved sites. In addition the team handles complaints made by customers of licensees.

The Compliance team headed by Jorn Starck oversees licensee compliance with the jurisdiction’s laws, regulations and guidelines, assisting applicants into compliant operating structures, approving their documented operational procedures and then subsequently assessing the correct implementation of these procedures in routine annual physical inspection of the licensee’s operations.

The Compliance team also ensures that all licensees meet and maintain the required technical standards. The team deals with the assessment of operating systems and changes to those systems - both hardware and software. This involves analysis, test scoping, liaison with external test laboratories and subsequent annual on-site review of operating systems.

The team consists of:

• Mark Archbold,DeputyDirector,whohasexperienceincasinoandsportsbookoperationsinAustralia;• Konstantinos Despotakis, Deputy Director, who has a senior management background in the betting and

gaming industry.• Neil Howard, Deputy Director, who has a background in eGambling software development and appraisal

systemsandnetworkdesign;• Bruce Florance, Deputy Director, who has experience in land based casino operations in Australia.• Paresh Rughani, Deputy Director, who has a background in data centre operations and worldwide lottery

systemimplementations;• Ian Haywood,AssistantDirector,whohassystemsnetworkingexperience;• Antony Rebanks,SeniorOfficer,whohasprogressedfromthetraineescheme;• Lisa Sanders, Senior Officer, providing administrative support.



RELATIONSHIP MANAGEMENTEach licensee is assigned a designated relationship manager who is the licensee’s prime point of contact for all Commission issues, including regulatory approval of internal processes and associated documentation, technical approval, inspections and general guidance on all matters relating to their licensing. This structure helps to foster an effective working relationship between each licensee and the inspectorate. Every licensee can draw on the guidance and support of someone who understands their corporate structure and business model, their technical requirements and the industry’s commercial imperatives.

The above two directorates are supported by a corporate services team consisting of:• Philip Taylor, in-house legal counsel, who is an English qualified solicitor with experience in the fields of white

collarcrimeandinformationrights;• Nicky Burland,financialcontroller,whohasexperienceinfinancialandhumanresourcemanagement;• Rowie Gaydon, office administrator, who has experience in administration within the hospitality and retail

industries;• Paula Moore, corporate services officer, who has administrative experience in the financial services sector.


The Commission’s key objective is to provide a regulatory environment which offers robust, enlightened, active regulation while also being responsive to the needs of a changing industry. In this way the Commission aims to protect players, to ensure the continuing high reputation of Alderney as a jurisdiction and to establish a regulatory environment which attracts operators who seek a comprehensive and tightly controlled regime.

The dynamic nature of the eGambling industry means that the Commission frequently needs to review regulations and legislation. Where changes to the regulations or the legislative framework are required, the Commission will advise the States of Alderney’s Policy and Finance Committee on the introduction or amendment of legislation.

REGULATORY CHANGES2012 saw one amendment made to the Alderney eGambling Regulations, 2009.

The Alderney eGambling (Amendment) Regulations, 2012 were made on 24th July, 2012 for two very important purposes. The first was to impose an obligation on licensees to identify and report attempts toinfluenceeventsuponwhichgamblingmaytakeplace. This was relevant in the context of the 2012 Olympics but is not limited to sporting contests and covers all forms of event based wagering. The second purpose was to introduce a requirement for Category 1 eGambling licensees to segregate player funds. This follows on from recommendations contained within the Dean Report, an independent review of the Commission’s effectiveness which was completed in March, 2012. WORKING WITH A GLOBAL INDUSTRYThe Commission is aware that developments in eGambling legislation elsewhere in the world may impact on the ability of Alderney licensees to access those markets and so expand and develop their businesses. The Commission is therefore in discussion with regulators in various countries so as to be kept fully informed on relevant legislative developments and also makes use of specialist consultants to keep the Commission informed of relevant legislative proposals.

During the year the Executive Director worked towards developing more formalised working relationships with other regulators, and successfully concluded agreements with those in Ontario and Singapore.

The Commission has also sought active working relationships with regulators in EU jurisdictions that regulateeGambling;inordertofacilitateAlderneylicensees’ entry into regulated EU jurisdictions. It remains the case that there is not as yet an EU-wide consensus on a regulatory approach to eGambling, such agreements need to be negotiated and agreed on an individual jurisdictional basis and may therefore take some time to come to fruition.

During the past year the European Commission published its Communication on remote gambling to the European Parliament. The report deals with the protection of consumers, preventing fraud and money laundering, safeguarding the integrity of sports and enhancing supervision, administrative cooperation and efficient enforcement in member states. In the area of ensuring efficient enforcement, the European Commission included, as one of its main actions, to strengthen dialogue with Third Countries such as Alderney, the Isle of Man and others but does not say how it intends to do so.

Approach to Regulation

Executive Director, André Wilsenach signing a Memorandum of Understanding with Lau Peet Meng, Chief Executive of the Casino Regulatory Authority of Singapore.


In facilitating regulatory cooperation between member states, the European Commission agreed to establish a Regulatory Expert Group consisting of representatives from the gambling regulatory authorities within Member States. The first of these meetings took place during the year under review. From discussions with representatives of the DG MARKT division of the European Commission it became evident that regulators from Third Countries will not have representation at these meetings unless invited as experts.

In order to ensure some form of participation in the Regulatory Expert Group, it was decided to meet with the Rapporteur in the European Parliament to express our views on the benefits of cooperation between regulators regardless of jurisdiction. In doing so, this Commission cooperated closely with the regulators in the Isle of Man supported by their respective Brussels offices.

Early indications are that the Rapporteur and at least one of the Shadow Rapporteurs in the European Parliament are sympathetic to the case for involving Third Countries in the Regulatory Expert Group. This is essentially based on the experience that Third Countries such as Alderney, Isle of Man and others could bring to the Expert Group.

Similarly to its position with European regulators, the Commission has also sought active working relationships with regulators in North American jurisdictions that are approaching the regulation of eGambling, in order to facilitate Alderney licensees’ entry into those jurisdictions. Following U.S. presidential elections in late 2012, it became clear that a federal approach to eGambling licensing and standards was not deliverable in the short term. However considerable intra-state activity has resulted from this position and the Commission maintains close contact with the emerging eGambling jurisdictions.

REGULATORY AND LEGISLATIVE COOPERATIONThe Commission liaises with other international regulatory bodies and often acts as an advisor to regulators and law-making entities in other jurisdictions. In the past year, the Commission has worked with the British Gambling Commission as well as gaming regulatory bodies around the world in connection with probity, due diligence investigations and international best practice. The Commission also works closely with non-gaming regulators such as the Guernsey Financial Services Commission and Guernsey’s Financial Intelligence Service. Accordingly the Commission has entered into a Memorandum of Understanding with the Guernsey Financial Services Commission.

Alderney has proven experience in establishing and maintaining a robust, business-friendly online gaming jurisdiction and plays an active role in international regulatory bodies such as the Gaming Regulators European Forum and the International Association of Gaming Regulators. The Commission also shares this expertise with others through participation in the major industry conferences.

In January the Executive Director was invited to give evidence to the House of Commons Culture, Media and Sport Committee in London in respect of plans to regulate remote gambling at the point of consumption and setting out Alderney’s position if the “White List” were to be withdrawn.

Approach to Regulation (continued)


During the course of the year, members of the Commission participated in various regulatory and industry conferences:

• InJanuaryMembersoftheCommissionanditsstaff attended the International Gaming Expo in London and the In-house Counsel spoke at the combating cybercrime conference.

• InFebruarytheDirectorofLicensingattendedtheGaming Executive Summit in Panama.

• InApriltheDirectorofLicensingspokeatthe Global iGaming Summit and Expo in San Francisco.

• InMaytheIn-houseCounselattendedafinancialcrime symposium held by the Law Society of England and Wales.

• InJunetheExecutiveDirectorattendedtheGaming Regulators European Forum in Portugal and was a speaker at the North American Gaming Regulators Association in Austin, Texas. The In-house Counsel attended the Westminster e-Forum held to discuss gambling matters.

• InJulyTheDirectorofLicensingmetwiththeNevada Gaming Commission in Las Vegas and the Executive Director was a moderator at the World Gaming Executive Summit in Barcelona. The In-house Counsel attended a workshop dealing with disciplinary tribunals in London.

• InSeptembertheExecutiveDirectorandtheDirector of Licensing attended the US Online Gaming Law Conference in Las Vegas.

• InOctobertheExecutiveDirectorwasaspeakeratthe International Masters of Gaming Law Autumn Conference in London. The Executive Director also participated as a speaker at The International Association of Gaming Regulators conference and The International Association of Gaming Advisers conference in Singapore. The Executive Director and the Director of Licensing attended and spoke attheEuropeaniGamingExpoinBarcelona;theDirector of Licensing was also a speaker at this event. The Director of Licensing attended the Global Gaming Expo (G2E) in Las Vegas.

• InNovembertheExecutiveDirectorwasaspeakerat a seminar organised by the Swedish Gaming Authority which was aimed at developing a regulatory regime for on-line gambling.

During 2012, the Commissioners had a number of meetings with representatives of active licensees. These meetings allow licensees to discuss matters of mutual concern with the Commission, and to share valuable information relating to a rapidly changing industry.

Approach to Regulation (continued)


The Commission takes seriously all issues relating to anti money laundering and combating the financing of terrorism. The Commission is keen to ensure that internationally agreed standards are maintained and that the anti money laundering / combating the financing of terrorism (“AML/CFT”) framework for egambling remains harmonised with other sectors in the Bailiwick.

The Commission follows closely the guidance of the Financial Action Task Force (“FATF”), an inter-governmental body whose purpose is the development and promotion of national and

international policies to combat money laundering and terrorist financing. In order to meet FATF objectives, organisations are required to maintain comprehensive statistics regarding the effectiveness and efficiency of systems for combating money laundering and terrorist financing. The Commission particularly notes and takes record of suspicious transaction reports by the Commission or its licensees, the details of onsite inspections, as well as any formal requests for assistance relating to AML/CFT issues. During the year 38 suspicious transaction reports were submitted by Alderney licensees, with 6 being submitted by the Commission itself.

Anti-Money Laundering/Combating The Financing of Terrorrism

The Commission continues to be involved in a number of initiatives aimed at raising awareness of these issues with licensees and the public. During 2012 these included briefing and training sessions for staff and licensees, as well as consultation with other regulatory bodies. The Commission is represented at meetings of the Bailiwick’s AML/CFT Strategy Committee.

Anti-Money Laundering/Combating The Financing of Terrorrism (continued)

All active licensees are inspected within one year of the approved start of their live operations, and then annually thereafter. All inspections incorporate a careful examination of a licensee’s AML/CFT procedures using a dedicated AML/CFT inspection template to ensure that they are robust. Each inspection is preceded by a mystery shopping exercise testing the site from the perspective of a player. An inspection will include reviews of player registration, payment systems, player due diligence and other controls used to prevent money laundering and to combat terrorist financing.



Licensing & Compliance Activity

It is a vital part of the Commission’s licensing regime that holders of eGambling licences and associate certificates, as well as key individuals, are approved as being fit and proper. All applicants – organisations, their owners and key personnel - are therefore carefully and rigorously scrutinised to confirm that the individual or organisation applying for approval is likely to operate effectively and within both the spirit and the letter of the Commission’s regulations.

After an application has been received, an initial information meeting will discuss in some detail the background to the application, the nature of the proposed eGambling activities and how the eGambling will be conducted. The discussion will also incorporate issues such as the financing, the individuals involved, and the software being used. This is to ensure that the Commission has a full and clear understanding of the proposition and addresses

early on any contentious or problematic areas. The Licensing Directorate will then investigate each corporate and individual applicant looking at their business history and relevant experience, associated principals and business associates. The Commission may outsource certain elements of the investigation to suitable third parties where geographical or language constraints make it difficult to obtain the necessary confirmation of an applicant’s fitness and propriety.

As at 31st December, 2012, there were 57 registered licensees, consisting of twenty holders of Category 1 licences only, fourteen holders of Category 2 licences only and twenty three holders of Category 1 and 2 licences. In addition there were ten Foreign Gambling Associate Certificates (“FGAC”) in issue. Fifteen new licensees and additionally four new FGACs were registered in the year.


Details of the licences and certificates1 issued are as follows:1. Postcode Lottery Alderney Limited (1 & 2)2. BGO Entertainment Limited (1 & 2)3. Table Top Entertainment Limited (1 & 2)4. Ledonford Gaming Services Limited (1)5. IGT (Alderney 5 ) Limited (1)6. Metro Play Limited (1)7. Elec Games Alderney Limited (1 & 2)8. Eurasia Sports (1)9. Jumpman Gaming Limited (1 & 2)10. Gala (Alderney) Limited (1 & 2)11. Relax Gaming Network Limited (2)12. Sportech Alderney Limited (2)*13. Daub Alderney Limited(2)*14. SHFL Entertainment (Alderney) Limited (2)15. Eyecon Alderney Limited(2) 16. Oddsmatrix Software Limited (FGAC)17. Bally Technologies (Gibraltar) Limited(FGAC)18. MyLotto24 Limited(FGAC)19. Evolution Gaming Malta Limited (FGAC)

* these were granted to existing eGambling licensees or certificate holders

During 2012, 10 licensees allowed their licence(s) to lapse.

Core Services Associate certificates were issued to the following:

1. Astra Games Limited2. Leapfrog Software Systems Limited3. Casino Technology AB4. Galewind Software Corporation5. O.M.I AB6. Wagermill Limited7. Quickspin AB8. MX Digital LLC9. Big Time Gaming Pty Limited10. Stronggate Limited11. Scientific Games (Gibraltar) Limited

Four holders of Core Services Associate Certificates allowed their certificates to lapse. This brought the number of Core Services Associate Certificates in issue at the end of the year to thirty four.

A complete list of holders of eGambling licences and associate certificates at the end of 2012 is set out at Appendix A.

Alongside licence applications, the Commission also approved forty one key individual applications. Key individuals are those who are deemed to be “in a positiontocontrolorexercisesignificantinfluenceover the business operations conducted under an eGambling licence, whether or not within the corporate entity exercising the licence”. In order to be approved, key individuals are subject to a rigorous probity investigation involving the examination of professional and personal histories, financial records, as well as appropriate checks through financial intelligence records.

Licensing & Compliance Activity (continued)

1 Details in parenthesis are as follows:- (1) Category 1 eGambling licence (2) Category 2 eGambling licence (1+2) Categories 1 and 2 eGambling licences (FGAC) Foreign Gambling Associate Certificate



HOSTING CERTIFICATESHolders of eGambling licences are required to house their gambling equipment in approved premises. Where gambling equipment is housed in the Bailiwick of Guernsey, it must be accommodated by a company which holds a hosting certificate. The first hosting certificates were issued in 2006 to Cable & Wireless, Itex and Newtel (now trading as JT (Guernsey) Limited). Currently nine hosting certificates have been issued.

1. Cable & Wireless Guernsey2. JT (Guernsey) Limited3. Itex (Guernsey) Limited4. E-Commerce Park N.V5. Continent8 Technologies PLC6. TelecityGroup France S.A7. 2E2 Guernsey Limited8. BM IT Limited9. Conet E-Commerce Services N.V Under the 2009 Regulations, foreign hosting premises used by an Alderney licensee must be approved, although they need not hold a hosting certificate. The Commission believes that this regulatory structure more adequately serves the operational needs of an increasingly multi-jurisdictional gaming industry.

TEMPORARY LICENCESA temporary licence allows a company to run eGambling operations from Alderney for a strictly limited period of time: no more than 30 days continuously or for an aggregate of 60 days in any six month period. This type of licence is designed to serve the needs of operators requiring short term use of Alderney based gambling equipment, whether for disaster recovery periods or perhaps for a period of transition from one location to another. One temporary licence was granted in 2012. Four temporary licences were in place at the end of 2012.

FURTHER APPROVALFollowing the Commission’s approval of a licence, the licensee will then be required to obtain full approval of their gambling equipment and their internal control system (ICS). All gambling equipment – including random number generators and all relevant software

and hardware - will be rigorously tested by an independent testing house to ensure compliance with Commission’s published technical standards. Twelve initial gambling equipment approvals were made in 2012

An ICS is a system of administrative controls and procedures used by a licensee when operating eGambling. Each ICS should be designed to provide:• administrativecontrol;• accountingandfinancialcontrol;• controlsovertheoperationofcustomeraccounts

andplayerfunds;• safeguardsinrelationtothesecurityofthe

licenseessystems;• comprehensiveandappropriateanti-money

launderingprocedures;• proceduresforidentifyingfraudulent,problemor

underage gambling.

Fourteen initial ICS approvals were made in 2012.

INSPECTIONSIt is an important element of the regulatory regime that active licensees are inspected on a regular basis to ensure that they are operating in full compliance with the Commission’s regulations and guidelines, and that they adhere to the procedures set out in their internal control systems. Licensees can generally expect to beinspectedonceayear;however,aninspectioncan be instigated at any time where the Commission has concerns regarding a licensee’s ownership or operations.

Paresh Rughani on an inspection visit.


The inspection team will closely examine a broad range of the licensee’s operations, including • corporatestructures,staffingandstafftraining;• financialreporting;• playerregistration,verificationandassociated

bankingprocedures;• antimoneylaundering/combatingfinancingof

terrorismprocedures;• gamefairnessandplayerprotection;• securitypoliciesandprocedures;• operationofapprovedgamesandgambling

equipment.

Following an inspection, a full report is prepared which will address any issues arising which need attention. Where serious issues arise, a further inspection or a formal sanction may be required.

During 2012, the regulatory and technical teams carried out thirty six inspections. In the main, these demonstrated a high level of regulatory compliance by licensees and reaffirmed the importance of active operational controls.

SPECIAL INVESTIGATIONSThe Commission has the power to conduct a special investigation into a licensee at any time. This may be deemed necessary to confirm or review a licensee’s operation, or where there are concerns regarding operational issues. While some of these may be conducted by visiting the licensee’s premises, they can also be carried out remotely. The findings from a special investigation may lead to a speedy resolution of any underlying causes for concern, or in some instances the issuance of further sanctions. Five special investigations were instigated in 2012.

SANCTIONSThe Commission has a range of sanctions at its disposal including financial penalties and, for the most serious regulatory breach, suspension or revocation of a licence or certificate. The Commission can also issue a “proposal to rectify” which can then be followed by a “direction to rectify” – in other words, instructions that the regulatory breach must be

rectified within a specified time. During the year the Commission issued seven rectification proposals and two directions to rectify, both of which were complied with speedily and efficiently. Where a breach of the regulations continues or becomes more serious, a regulatory hearing may be called as an opportunity for the licence or certificate holder to make representations and present their case to the Commission. There were no regulatory hearings held during 2012.

SEGREGATION OF PLAYER FUNDSThe implementation of the Alderney eGambling (Amendment) Regulations, 2012 will impact upon financial reporting when it takes full effect in 2013. As a result the reporting requirements have been revisedtoreflecttheinformationnecessarytomonitorcompliance.

The amendment to the Regulations requires Category 1 eGambling licensees to segregate funds standing to the credit of customers in a separate bank account held solely for that purpose. In certain circumstances the licensee may be required to provide a binding guarantee from their parent company.

FINANCIAL MONITORINGAll licensees are required by the regulations to ensure that they meet, on a continuous basis, the following three prudential ratios:• Cashmustalwaysexceedplayerbalances;• Currentassetsmustalwaysexceedcurrent

liabilities;• Totalassetsmustalwaysexceedtotalliabilities

(excluding capital) by at least 25%.

These requirements seek to ensure that operators have sufficient resources to pay out players’ funds at any time. The Commission must be satisfied that acceptable arrangements to satisfy these requirements are in place before the licensee can gain approval for full activation of their operations.




Licensees are required to submit monthly and quarterly financial reports and regular operational reports covering matters such as player activity, suspicious transactions, significant player deposits or losses. These are closely reviewed by the Commission, with any potentially contentious issues beingflaggedforfurtherconsideration.Licenseesarealso required to carry out a fully independent financial audit each year and to submit their audited accounts to the Commission.

In 2013 the Commission proposes to introduce a single new solvency ratio, following the 2012 regulatory change requiring the segregation of player funds. This change has removed the main original reason for the three prudential ratios, which will be replaced by a single ratio requiring each licensee to hold liquid capital exceeding three months’ overheads.

THE ALDERNEY GAMBLING LICENSEES’ FORUMThe Alderney Gambling Licensees’ Forum (AGLF) exists to allow Alderney licensees and the Commission to discuss matters of mutual interest. Topics discussed include legal and regulatory developments in Alderney and elsewhere, technological issues and wider gambling matters.

Malcolm Graham, CEO of PKR Limited and the current chairman of the AGLF, has said: “The AGLF is a useful opportunity for licensees and the Commission to meet and discuss issues affecting the industry as a whole. It allows licensees to communicate with the Commission and vice versa. The Commission continues to build on its previous activity regarding agreements with other regulators and the forum allows licensees to be updated as well as giving licensees the chance to offer their comments and thoughts. The forum is a valuable feature in Alderney’s eGambling regime.”

The AGLF met twice during 2012 to discuss the United Kingdom’s review of remote gambling, player fund protection, the actions of the Commission in the EU and USA, Regulating Affiliates, the Economic Impact Study by KPMG and the Problem Gaming Study by the Responsible Gambling Council in Canada.

TRAINING AND INFORMATION SESSIONSIn December 2012 a training and information session dedicated to AML/ CFT matters was held for licensees. This was the fifth such session organised by the Commission and is now becoming a regular fixture in the Commission’s calendar. Representatives from newlyoperationallicenseeswererequiredtoattend;representatives from all other licensees could attend on a voluntary basis. The meeting was attended by 61 delegates from 32 licensees. The Commission welcomes the importance licensees place upon this subject.

Delegates received an information briefing from the British Gambling Commission’s Sports Betting Integrity Unit as well as sessions conducted by the Commission’s Director, Compliance on the inspection process and In-house Counsel on the reporting of suspicious transactions. These sessions were followed by a specialist training seminar on recent developments in AML/CFT, issues relating to social networking and crime together with a focus on PEPs (politically exposed people).

Malcolm Graham, Chairman of the AGLF.

REGULATORY ACTIVITY – COMPLAINTSThe Commission has in place a complaints procedure to address player issues that have not been satisfactorily resolved by a licensee. During 2012, 933 complaints were received and dealt with by the Commission, a decrease on the previous year reflectingthehighnumberofcomplaintsreceivedtheprevious year related to a former licensee. Complaints arose for various reasons, including:• claimsofunfair,“fixed”or“biased”gaming;• betdisputes;• IDrequirementconcerns;• technicalmalfunctions;• poorcustomerservice;• unfairgamerules,termsandconditionsorbonus

requirements;• unfairaccountclosures;• cashwithdrawalissues;• voidedbets.

Six complaint rulings were escalated on appeal to the Executive Director and there was one further appeal to a Commission hearing. In each of these cases the original ruling was upheld.

The Commission aims to work closely with licensees on resolving issues related to customer complaints, and also liaises with relevant industry bodies. During the year Commission staff attended the annual conference of GamCare, a UK based charity providing support, information and advice to problem gamblers, and also attended a GamCare training session.



Technical Activity

One of the ways by which the Commission seeks to ensure that all eGambling is conducted fairly is by requiring full approval of each licensee’s gambling equipment, both hardware and software. The licensee’s gambling equipment including random number generators and all relevant software and hardware will be rigorously tested by an independent testing house to ensure operational worth and game fairness.

Following such approval, the Commission then aims to control any significant subsequent changes using an automated change control system which allows licensees to enter and upload relevant information using a secure online portal. This system stores detailed information on licensees’ approved games and is easier for licensees to use. The greater clarity of the information processed also ensures a significant increase in operational efficiency. Two thousand and twenty two new games and game approvals were processed in 2012.

TESTING HOUSESTesting of licensee games and gaming activity is contracted out to independent specialist testing houses. The Commission does not formally licence or certificate testing houses but has developed ongoing relationships with a range of organisations approved as appropriate for Commission use, following close examination of their ownership and industry reputation as well as their technical capabilities and operational history. The number of testing houses approved for Commission use increased slightly during 2012 and now stands at thirteen.


STATEMENT OF THE COMMISSION’S RESPONSIBILITIESThe Commission acknowledges that it is responsible for preparing financial statements for each financial year which give a true and fair view of the state of affairs of the Commission and of the profit or loss of the Commission for that period. In preparing those financial statements the Commission is required to:• selectsuitableaccountingpoliciesandapply

themconsistently;• makejudgementsandestimatesthatare

reasonableandprudent;• statewhetherapplicableaccountingstandards

have been followed subject to any material departures disclosed and explained in the financialstatements;and

• preparethefinancialstatementsonthegoingconcern basis unless it is inappropriate to presume that the Commission will continue in business.

The Commission is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Commission. The Commission is also responsible for safeguarding its assets and hence for taking reasonable steps for the prevention and the detection of fraud and other irregularities.

The following persons served on the Commission during the year under review:• MrJohnGodfrey(Chairman);• MrRaymondBirdseye;• DrIsabelPicornell;• MrJeremyThompson

Financial Statements



Independent auditor’s report to the Commission

We have audited the financial statements of Alderney Gambling Control Commission (the “Commission”) for the year ended 31 December 2012 which comprise the income statement, the balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards.

This report is made solely to the Commissioners, as a body, in accordance with the terms of our engagement letter dated 27 October 2012. Our audit work has been undertaken so that we might state to the Commission those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Commission and the Commissioners as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the commission and the auditorAs explained more fully in the Statement of Commission’s Responsibilities set out on page 21, the Commissioners are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assesment of: whether the accounting policies are appropriate to the Commission’s circumstances and have been consistently applied andadequatelydisclosed;thereasonablenessof significant accounting estimates made by the Commissioners;andtheoverallpresentationofthefinancial statements. In addition, we read all the financial and non-financial information in the financial

statements to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:• giveatrueandfairviewofthestateofthe

Commission’s affairs as at 31 December 2012 andofitssurplusfortheyearthenended;

• areinaccordancewiththeUnitedKingdomAccounting Standards.

Matters on which we report by exceptionWe have nothing to report in respect of the following matters, in our opinion:• theCommissionhasnotkeptproperaccounting

records;or• thefinancialstatementsarenotinagreementwith

theaccountingrecords;or• wehavenotreceivedalltheinformationand

explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.

KPMG Channel Islands LimitedChartered Accountants

22 March 2013

Disclaimeri) The maintenance and integrity of the Alderney

Gambling Control Commission’s website is the responsibilityoftheCommissioners;theworkcarried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements or audit report since they were initially presented on the website.

ii) Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


Note 2012 2011 £ £

Fixed assets

Computer, office equipment & furniture 90,230 25,004Leasehold 396,767 312,746Web hosting 59,982 61,271 2 546,982 399,021 Current assets Cash at bank and in hand 3 2,475,258 2,625,063Prepayments 15,214 32,574

2,490,472 2,657,636 Creditors: amounts falling due within one year 4 (1,063,369) (1,095,574) Net current assets 1,427,103 1,562,062 Total assets less current liabilities 1,974,085 1,961,083 Capital and reserves

Retained surplus brought forward 1,961,083 2,107,740Net surplus/deficit for the year 13,002 (146,657) Retained surplus 1,974,085 1,961,083

The financial statements on pages 21 to 28 were approved by the Alderney Gambling Control Commission on 21 March 2013 and signed on its behalf by:

Mr John GodfreyChairman

Balance Sheet as at 31st December 2012

Note 2012 2011 £ £

Income

Licence fees 4,835,650 4,545,650Fees charged to applicants and licensees 394,476 416,994Bank interest 20,751 20,474 5,250,877 4,983.118

Expenditure Staff costs 6 1,617,880 1,387,206Commissioners’ fees 5 106,854 103,241Premises, furniture and equipment 74,732 66,795Web hosting 82,000 77,003Consultancy 176,996 86,769Conferences and general travel 152,315 123,261Postage, stationery and telephone 44,581 38,856Administrative expenses 87,169 218,251Depreciation 2 94,469 136,359 2,436,996 2,237,741 Distributions in year 7 2,800,879 2,892,034

Net surplus/deficit 13,002 (146,657)

Income Statement for year ending 31st December 2012


Notes to the Financial Statements Year Ended 31st December 2012

1. Basis of AccountingThe financial statements have been prepared under the historical cost convention and in accordance with applicable UK accounting standards. The income in the financial statements is collected by the Commission on behalf of the States of Alderney. After deduction of the expenses incurred and working capital required to fund the Commission the surplus is distributed to the States of Alderney.

DepreciationDepreciation is calculated using the straight line method at the following rates:

•Officefurniture 25%perannum•Computersandrelatedequipment (including change control) 33% per annum•StAnne’sHouserefurbishment 10%perannum

Licence feesUnder the terms of The Alderney eGambling Ordinance, 2009, licences granted by the Commission are valid for an indefinite period. A non refundable licence fee is payable on issue of the licence and in advance of each anniversary of the issue of the licence. The licence fees are recognised in the Revenue account in the period in which they are received.

Cash flow statementUnder Financial Reporting Standard no. 1 the Commission is exempt from the requirements to prepareacashflowstatementonthegroundsofitssize.

ExpensesExpenses are accounted for on an accruals basis.

LeaseholdThe Commission entered into a ten year lease on the office property in Alderney, commencing in April 2008.

The rental amounts for 2012 charged to the Revenue account and included in premises, furniture and equipment expenditure were £43,537 (2011 - £38,175).

The Commission is committed under the lease to make payments of £36,000 per year plus any RPIX increase, subject to review in the fifth year, until the end of the lease. The rental is charged on a straight line basis over the lease term.

Capital commitmentAt the end of 2011 the Commission entered into a contract to extend the office space at the leasehold premises. The total cost for the extension works was £193,167. The rental payments were also increased in linewiththeincreaseinfloorspacenowavailableatthe leasehold premises.


2. Fixed assets Computer Office Web equipment furniture Leasehold Hosting Total £ £ £ £ £

Cost At 1 January 2012 124,058 42,092 498,536 203,448 868,134Additions 43,801 48,455 142,019 8,154 242,428 At 31 December 2012 167,859 90,547 640,555 211,602 1,110,562 Depreciation At 1 January 2012 103,794 37,352 185,790 142,177 469,113Charge for year 16,865 10,164 57,999 9,440 94,468 At 31 December 2012 120,659 47,516 243,789 151,617 563,581 Net book value At 31st December 2012 47,199 43,031 396,767 59,985 546,982 At 31st December 2011 20,264 4,740 312,746 61,271 399,021

Notes to the Financial Statements Year Ended 31st December 2012 (continued)



3. Cash at bank and in hand 2012 2011 £ £

Cash at bank:Business reserve account 402,660 489,998Applicant and Licensee deposit account 990,123 883,395Treasury accounts 1,000,017 1,000,017Current account 82,362 251,524Petty cash 96 129

2,475,258 2,625,063 4. Creditors: amounts falling due within one year 2012 2011 £ £

Refundable deposits 691,846 678,294Creditors and accruals 371,178 417,280

1,063,369 1,095,574

Refundable deposits are held against the costs of investigating applicants and inspecting licensees and may be refunded in whole or in part.

5. Commissioners’ feesIn accordance with the Gambling (Alderney) Law 1999, as amended, the States of Alderney ultimately meets the fees and expenses of the Commissioners, including the Chairman.

6. Pension scheme and life assuranceA defined contributions pension scheme, together with life assurance cover, is provided for employees. The scheme is administered by Anthony Le Blanc and Partners Limited in Alderney and was started in May 2002. The scheme requires employees to contribute 6% of gross salary to the scheme and the Commission contributes a minimum 7.5% of gross salary to the scheme on the employees’ behalf. The annual pension contribution of £129,005 (2011 - £112,491) is included in staff costs. At the year end there were no prepaid or outstanding contributions (2011 – £nil).



7. Distributions to the States of AlderneyDuring 2012 the States of Alderney directed distributions from the retained surplus in the amount of £2,800,879 (2011 - £2,892,034).

8. Guernsey Income TaxThe Commission is not subject to Guernsey Income Tax.


Appendix AeGambling licensees (Category 1, 2, or both) and Foreign Gambling Associate Certificates as at December 31st 2012

Amaya (Alderney) Ltd 2Aragon Technologies Ltd 2Arkin Sports & Leisure Ltd 1 & 2Aydogan Tourism & Leisure Ltd 1 & 2Bally Technologies (Gibraltar) Ltd FGACBGO Entertainment Ltd 1 & 2Blue Square Gaming (Alderney) Ltd 1 & 2Bonne Terre Ltd 1 & 2Boylesports (Alderney) Ltd 1Bubble Group BV FGACDaub Alderney Ltd 1 & 2Elec Games Alderney Ltd 2ElectraWorks (Alderney) Ltd 1 & 2Entwine Technology PTE Ltd FGACEurasia Sports Ltd 1Evolution Gaming Malta Ltd FGACEyecon Alderney Ltd 2FairplayGames Ltd 1GameAccount Alderney Ltd 1 & 2GameDuell GmbH FGACGenting Alderney Ltd 1Global Betting Exchange Alderney Ltd 1 & 2Global Sports Trading Services Ltd 1GP (Alderney) Ltd 1Greentube Alderney Ltd 2IGT (Alderney 2) Ltd 1IGT (Alderney 4) Ltd 2IGT (Alderney 5) Ltd 1IGT (Alderney 7) Ltd 1Intellectual Property & Software Ltd 1 & 2Interactive Sports (CI) Ltd 2Jumpman Gaming Ltd 1 & 2Kambi Sports Solutions (Alderney) Ltd 2Ledonford Gaming Services Ltd 1

Marathon Alderney Ltd 1 & 2Metro Play Ltd 1Microgaming Software Systems Ltd FGACMonte Carlo Ltd 1 & 2MyLotto24 Ltd FGACNet Entertainment Alderney Ltd 2Netplay TV Group Ltd 1Oddsmatrix Software Ltd FGACOrinic Limited 1Parlay Games Ltd 1 & 2Pinnacle Sports Europe Ltd 1PKR Ltd 1 & 2Play n Go Alderney Ltd 2Playtech Software (Alderney) Ltd 2Postcode Lottery Alderney Ltd 1 & 2PT Network Management Ltd FGACQSB Gaming Ltd 1 & 2Ragnarok Corporation N.V FGACRelax Gaming Network Ltd 2Samvo International Ltd 1 & 2SE Asia Gaming Ltd 1SHFL Entertainment Alderney Ltd 2Small Screen Casinos Ltd 1 & 2Sportech Alderney Ltd 1SPS Betting (Alderney) Ltd 1Table Top Entertainment Ltd 1 & 2Totepool Alderney Ltd 2Totesport Alderney Ltd 1Triplebet Ltd 1 & 2VF 2011 Ltd 1Virgin Games Alderney Ltd 1Virtue Fusion (Alderney) Ltd 1 & 2WMS Alderney 2 Ltd 1 & 2


Appendix BStatistics

2012 2011 2010 2009 2008 2007

Number of licensees 57 51 51 44 42 34 New licences issued 15 12 7 14 13+1 14 Number of licence applications refused 0 1 0 0 0 0

ICS initial approvals 14 15 8 10 10 10 Inspections 36 34 27 22 20 13 Special investigations 5 1 2 2 3 10 Sanctions 14 28 12 1 1 10 Revocations 0 3 0 0 0 0 STRs copied 38 35 64 16 9 3

STRs submitted 6 2 2 1 0 0 Training events 1 1 1 1 3 1


St. Anne’s House, Queen Elizabeth II Street, Alderney, Channel Islands, GY9 3TBTel: +44 (0) 1481 825500 Fax: +44 (0) 1481 823978Email: [email protected] Web: www.gamblingcontrol.org

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